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Easton in Japan: good average, but no homers

It’s spring again, when throughout America one can hear the ping of aluminum bats striking baseballs, while U.S. and Japanese trade negotiators amble past Washington’s cherry blossoms, making small talk about supercomputers, communications satellites and lumber products.

What better time, then, to call Easton Aluminum Co., an aluminum bat maker which some observers have held up as an example of the excruciating ordeal awaiting U.S. exporters who seek to penetrate the Japanese market?

“We’re leaps and bounds ahead” of the company’s position at the beginning of the decade, reported Mike Danford, general manager of bat products at the Van Nuys maker of composite fastpitch softball bats , tent rods and arrow shafts.

But Easton’s experience in that market has tempered its executives’ ambitions for further penetration, for reasons that are unrelated to real or perceived trade barriers. Even what must be regarded as a successful long-term effort might not pay extravagant dividends, Danford seemed to suggest.

“We can grow a little more. We wouldn’t mind doubling. But beyond that I don’t know,” Danford said. Easton’s Japanese sales have grown to over 25,000 units in each of the past three years, including one 30,000-unit year, and another strong year is expected in 1990, he said.

Danford’s caution about the Japanese market comes as the company is scrambling to boost its output by 20 to 25 percent in order to cope with burgeoning domestic demand. Easton also is contemplating a growing market in Europe, which Danford predicted could be more important to the company than Japan in a decade. A new, proprietary alloy, EA70, has won warm acceptance from the market as the “second coming” of its earlier CU31 material, he said.

Amid that background of success, Danford’s hesitance to pursue substantial future gains in Japan might seem curious. Certainly, the bat maker has paid its dues to get where it is today – so much so that some observers have held up the company as an example of the gauntlet U.S. companies must run to penetrate that market.

In Trading Places, a 1988 account of his encounters at the negotiating table with the Japanese, Clyde V. Prestowitz recounted how a campaign launched by Easton around 1980 to win needed safety approval from Japanese government authorities required years of effort and high-level diplomatic intervention before discriminatory clauses of Japanese standards were eliminated.

“Four years later, however, the Americans still had less than 1 percent of the Japanese market. The distributors had the last laugh,” wrote Prestowitz. The former Counselor for Japan Affairs to the Secretary of Commerce now is a senior associate with the Carnegie Endowment.

The moral, as Prestowitz presented it, was that even U.S. companies that hew to a long-term strategy in Japan are likely to run into a tangle of entrenched interests and cultural and other non-tariff barriers. That was the subject of talks that continued last week in Washington on “structural impediments” to U.S. exports. Negotiators appeared to be making limited headway in the areas of supercomputers, satellites and wood products, although broader issues like Japan’s opaque distribution system still awaited a breakthrough.

Judging by Easton’s experience in the last couple of years, Prestowitz’ assessment might have been overly pessimistic. Today, Easton itself holds about 3.5 percent of the total Japanese market of 850,000 units – a healthy gain from the 1 percent U.S. share Prestowitz described.

The process of getting established “certainly was frustrating,” Danford acknowledged. Like other manufacturers, Easton eventually realized it had to find a strong domestically – in this case, Mizuno Corp., the biggest distributor in the Japanese market.

It also had to undergo further acculturation to the market – realizing, for instance, that while Americans like their aluminum bats to sound as close to a wooden bat as possible, the Japanese want theirs to sound like a bell. “We couldn’t simply take our baseball and say, here, Mizuno, here’s what you sell,” Danford said.

Even with that out of the way, however, the sheer fragmentation of the market has served to temper Easton’s ambitions. In Japan, one producer’s sales last year of 6,500 units of a new model was enough to have it considered a runaway success. One retailer even was able to win a trip to the U.S. by selling a dozen or so units of a successful model. With Easton able to supply 3.5 percent of the Japanese market with only 2.3 percent of its total output, “We produce more bats in one year than the Japanese market can consume,” Danford said.

In that environment, to reach 100,000 units in annual Japanese sales, Easton would have to develop 20 or so successful models against an array of entrenched competitors. And it would have to freshen them up with cosmetic changes every year or two. Given the marketing and manufacturing realities involved, “your likelihood of striking it rich is slim to none, and Slim’s leaving town,” Danford observed.

Easton also has encountered a level of fussiness among Japanese consumers that Danford views as extraordinary. Bats sold there are divided into 10-gram gradients – and even then, retailers keep scales on hand so customers can refine their choice further. Even with bats commanding $130 or $140, it’s tough to make money under those conditions. “It makes for small production runs that are expensive production runs,” Danford said.

By any standard, however, Easton would have to be considered a success story in exporting to Japan. Surely, Easton’s long development effort wasn’t a waste of time?